Markets in Asia under pressure following North Korea threats

Earlier this morning, North Korea added uncertainty into plans for a widely anticipated meeting between President Donald Trump and Kim Jong Un due on June 12.

State news agency KCNA reported North Korea Vice Minister of Foreign Affairs Kim Kye Gwan is ready to reconsider the encounter between both leaders if Washington continues to insist on Pyongyang relinquishing its nuclear weapons.

In Japan, the Nikkei 225 was down 0.39 percent and the broader Topix dropped 0.27 percent, with mining and oil components pushing the benchmark lower.

South Korea's Kospi index hover around the flat line during the session, with gains from Samsung Electronics being offset by declines in oil and manufacturing stocks.

Hong Kong's Hang Seng Index was 0.01 percent lower by the time of this writing, while the mainland Shanghai composite ended down 0.70 percent and the Shenzhen composite dropped 0.43 percent.

In the currency market, the dollar continued to gain across the board. Overnight the dollar hit 93.32, its highest level this year in reaction to easing concerns over a potential trade war between the United States and China. Investors turned their eyes to Treasury yields.

The 10-year Treasury yield traded around 3.089% this morning, remaining close to a 7-year peak. The increase of yields widens the differential between Federal Reserve interest rates and the ones of other central banks, which is good for the dollar.

On Tuesday, Federal Reserve Bank of Dallas President Robert Kaplan warned about the risks of speeding up the pace of interest-rate hikes by the Federal Reserve.

The “yield curve is one of the considerations on my mind, which is why I’m not jumping away from three as a base case,” Kaplan said. “I don’t want to knowingly invert the yield curve, but I think it’s too soon to say how much operating flexibility we are going to have."

The Federal Reserve is looking at least three interest rate hikes for 2018. However, recent data from the labor market and inflation supported the possibility of a fourth increase this year.

“I’d like to first get to neutral, see if we can do that, and then we’ll have to make a judgment when that time comes” the former Goldman Sachs executive, who is not voting on policy this year, said about whether to Fed should keep raising rates. “But even in my dot plot submissions, I would not be submitting estimates that would, in my view, knowingly invert the yield curve.”

In other news, Federal Reserve Bank of San Francisco President John Williams reiterated that three to four interest-rate hikes are expected in 2018, in his own vision. The FOMC representative said he’s “very positive” about the economic outlook in the US and globally.

“If we see the inflation pressures, wage pressures, all starting to build, that would argue for a somewhat faster tightening of monetary policy,’’ Williams said to reports in Minneapolis following an event at the Economic Club of Minnesota.

On the data front, retail sales rose 0.3 percent in April, falling short from an estimated 0.4 percent. Business inventories for March were unchanged and the New York Empire State manufacturing index for May surpassed its forecast with a 20.10 reading.

Economic calendar:

Europe: Germany’s consumer price index for April is up at 06:00 GMT, followed by the Eurozone’s measure of it at 09:00 GMT.

United States: building permits and housing starts for April are coming at 12:30 GMT. Industrial production numbers for April will become available at 13:15 GMT.